Commercial Integrator August 2023 - 3

EDITOR'S NOTE
Emerald X, LLC.
100 Broadway, 14th
AVIXA Research
Augurs Well
for AVaaS' Future
WHILE AT INFOCOMM, I met with AVIXA's
market-research gurus to discuss industry
trends. As always, Sean Wargo, vice president,
market intelligence, and Peter Hansen,
economist, offered insightful observations.
For example, Wargo pointed to indicators
that the AV industry is returning to a " steady
state " following artificially hot growth during
the pandemic recovery. For his part, Hansen
noted that AVIXA is closely eyeing recession
risk. Although he acknowledged numerous
positive indicators in recent months, Hansen
still pegged overall recession odds as being
bigger than normal - roughly 50%. But, given
the likelihood that any recession would be
shallow and short-lived, he added, " Should a
recession happen or not happen, either way,
the outcome for this year for pro AV is likely
to be relatively similar. "
Wargo and Hansen compellingly opined
on how hardware-price deflation, high interest
rates and IT/AV convergence are helping
to power the transition to AV-as-a-Service
(AVaaS). Wargo noted that deflation in
certain product categories trimmed nominal
growth-rate calculations in our industry. He
remarked that displays continued to enjoy
volume growth among commercial clients;
however, lower price points due to increased
production capability and weaker-thanexpected
consumer investment nevertheless
curtailed topline revenue. According
to Wargo, some integrators have sought to
close that revenue gap by leaning into selling
knowledge, not just hardware. " Any time
there's continual price decline in an area,
we're seeing services come in to provide
additional value, " he propounded.
Hansen hastened to add that interest
rates, too, are making AVaaS and managed
services more appealing. As of this writing,
the federal funds rate is 5% to 5.25%; that
figure, Hansen said, indicates that fronting
the capital for a major project is more expensive
now than it has been since 2007. " So,
that means transforming from that upfront
payment model to that managed-service
commercialintegrator.com
model has that much more financial advantage
for companies today, " he explained.
And with hybrid work continuing to evolve
into various permutations, many decisionmakers
love the flexibility of AVaaS.
IT/AV convergence further undergirds
the rise of AVaaS because, as the lines blur
between AV and IT departments, our industry
is beginning to embrace the IT norms of
standardization, uniformity and subscriptionization.
Wargo rightly noted that IT actually
moved to a managed-services-based model
some two decades ago. " They're more used
to handling their budgets that way...used
to those contracts, " he observed. And it
behooves integration businesses to become
conversant in that kind of OpEx language -
even if it's unfamiliar - because integrators
must pivot away from the " install-it-and-forget-it "
approach. You know that model: Doing
a job and then not speaking to the client
until seven years later, when it's time for a
rip and replace. The AVaaS approach allows
continual, ongoing touchpoints, as well as
the ability not only to sell products but, more
valuably, to assure outcomes.
Against this backdrop, it can't be too surprising
that, according to Wargo, the AVIXA
team almost always upwardly revises managed
services in its research reports. Indeed, at
present, the association pegs managed services
as having a nearly 11% compound annual
growth rate (CAGR) - and Wargo and Hansen
caution that that might be too conservative.
Aſt er all, managed-services-based revenues
are still relatively low, meaning it won't take a
lot to drive those percentages much higher.
In a turbulent, unpredictable economic
landscape, integration businesses must be clients'
constant, day-to-day partners and allies.
According to AVIXA research, the water's just
right for those who are bold enough to jump
in. So, what do you say? Are you ready?
Dan Ferrisi, Editor-in-Chief
dan.ferrisi@emeraldx.com
@danferrisiedit
Floor
New York, New York 10005
800-440-2139
commercialintegrator.com | @commintegrator
EDITORIAL
Editor-in-Chief Dan Ferrisi,
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Commercial Integrator August 2023

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